The Bridges That Should Be Built: Cross-chain Overview

Swap.Online addresses the area of cross-chain technologies and continue the series of articles about the most acute issues of nowadays blockchain sphere. We would like to discuss the future of cross-chain, the thorny path to this level of blockchain interaction, and where we are now on this path.

How They Got There: Two Approaches to The Origin of Cross-Chain

Cross-chain as multi-purpose, decentralized, peer-to-peer, direct informational interaction between different blockchains is a complex phenomenon for both cryptocurrencies and the rest of blockchain implementation spheres. Thus, we can explain the origin of cross-chain in terms of at least two approaches.

In a broad sense, to say, ideologically, it is the expression of Web 3.0. inheriting from Web 1.0 with its author-generated content and from Web 2.0 with CMS, usability, etc. Web 3.0 is widely understood as the decentralized, peer-to-peer web. Real decentralization (both political and architectural, in terms of Vitalik Buterin) can be reached only in case of free interaction between different blockchains. Even single centralized element — proxy-token, main server, website administration, etc., should not be considered suitable for Web 3.0.

In a narrow or, if you will, applied sense, cross-chain is the marker of a new level of anonymous encrypted messages transfer. Let’s take the cryptocurrency exchanges (find more on that in our review). Being descendants of the non-blockchain digital currency exchanges, centralized exchanges allowed the interaction between two different chains, but only serving as the centralized point of exchange which resulted in the bulk of vulnerabilities. First decentralized exchanges either use proxy-token (e.g. Waves and NXT) or are pegged to one type of blockchain (EtherDelta and Stellar DEX). So, the launch of cross-chain exchanges using the Atomic Swap technology, e.g. Altcoin.io or Komodo’s BarterDEX (both of them are now in Beta testnet) is among the most anticipated milestones of the sphere evolution in the year of 2018.

Challenges and Responses

In terms of practice, cross-chain solves at least four problems of the blockchain. Firstly, it’s the scalability of network. We have already reviewed proprietary solutions for Bitcoin and Ethereum networks, but the fact is — every isolated blockchain has its bottlenecks making the transactions slow and high-cost. Secondly, it’s isolability: even with CEXs and proxy-token DEXs, different blockchains are still isolated from each other, so, the system based on ERC-20 token has very poor prospects in interaction with Bitcoin-based system. Thirdly, it’s developability: dApps really anticipate cross-chain technologies to adopt useful and interesting solutions. Finally, it is so called ‘shared security’ problem: two interacting blockchains can be much more secure than each of them individually.

Cross-chain can be applied in the spheres of interaction between digital and traditional economy. IoT, Big Data, ID verification, digital banking, money remittances, civil legal proceedings, insurance, copyright protection, crowdfunding, etc., remain a klondike for cross-chain solutions. For example, through the cross-chain solutions can be built a ‘triangle’ between investors, ICO team, and oracle body with no even slightest possibility for anyone to cheat on the whole system. The triangle of such kind can be formed between the shareholders, real estate developers, and supervisory governmental entity within the framework of mortgaged housing construction. And there are plenty of other examples like that.

Polkadot Project: The Infancy of The Pioneer

Polkadot is one of the most promising cross-chain project. It is being developed since 2017 by Parity Technologies (Great Britain), commissioned by Web3 Foundation (Switzerland). The idea of the project is to develop a protocol integrating different blockchains between each other. Structurally it will consist of ‘Parachains’ — the ordinary blockchains even if with different characteristics, ‘Relay chain’ that coordinates consensus and transaction delivery between chains, and ‘Bridges’ — links to blockchains with their own consensus such as Ethereum.

One doesn’t need to be an expert in blockchain to note that ‘Relay chain’ is a kind of very delicate balance. It is maintained by four types of actors in cooperation: validators, collators, nominators and fishermen.

Validators secure the Relay chain by their stakes of product tokens (DOTs, native Polkadot blockchain), validating proofs from collators and participating in consensus with other validators;

Nominators secure the Relay chain by selecting good validators and staking DOTs;

Collators maintain parachains by collecting parachain transactions from users and producing state transition proofs for validators. They also monitor the network and prove bad behaviour to validators;

Fishermen act as a kind of the final security frontier, they monitor the network and prove bad behaviour to validators.

In a word, this is a complicated system sharing PoS- and PoW-principles. This system is governed by sophisticated hierarchy of three types of ‘plebiscite’: council, referenda and public referenda. As a result, bad actors lose their stakes (DOTs) and eventually expelled from the network. Nobody has an option to get control over the full network. More on that here.

But the majority of this is still under development: a project is in its early days. Milestones of the project are called PoC (proof-of-concept), in July, 2018, the PoC-2 was released. What’s ready for today? You can download desktop testnet version of the Polkadot (‘Krumme Lanke’) and launch your own node as ‘parachain’: the list of nodes can be tracked online. Relay chain is close to its final image. It is backed by Parity’s Substrate technology written on Rust, however, the core functionality that comprises the state machine was written in WebAssembly (Wasm). Finally, first transaction of some DOTs between two chains was executed in Polkadot network.

Founder of Parity Technologies announced first finalised transaction in Polkadot

By the way, there are a lot of uncertainties about Polkadot. The mainnet release called Polkadot Genesis is scheduled for the Q3, 2019. Developers say they have no idea how many PoCs will be released on the way to that day. Also, they warn that ‘Polkadot may not be successfully developed or may not function as intended and that the Polkadot genesis block may not be deployed as intended or at all. Finally, the project team is still not sure about the role of DOT holders and this token features. All this may seem like a pure overreaction. Nevertheless, the most professional part of crypto community highly appreciates all Polkadot updates.

Cross-chain for Swap.Online

Swap.Online includes plenty of cross-chain implementations. Firstly, basic solution for our wallet is cross-blockchain exchange of crypto. Now, the Atomic Swaps with the BTC, ERC-20, ETH, and EOS are already being executed, operations with USDT are successfully tested, NEM coins are to be added very soon. Cross-chain is also used in Cross Swap technology allowing to send crypto during the operation to different addresses. Finally, In the near term, Swap.Online plans to launch Swap.Button — a many-to-one transactional instrument for the acceptance of crypto investments to the blockchain projects with the cross-chain as the inevitable element.

Don’t forget, there are only five days left to mainnet release of Swap.Online cross-chain wallet.